Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — FY2023 Earnings Presentation
60 slides from Deutsche Pfandbriefbank's earnings presentation, Mar 7, 2024
Slide 1: Results Q4/FY 2023 - Analyst Presentation
Results Q4/FY 2023 - Analyst Presentation 7 March 2024
Slide 2: Disclaimer
Disclaimer This presentation is not an offer or invitation to subscribe for or purchase any securities in any jurisdiction, including any jurisdiction of the United States. Securities may not be offered or sold in the United States absent registration or pursuant to an available exemption from reg
Slide 3: Key Messages: pbb is an expert in managing the cycle
KEY MESSAGES pbb is an expert in managing the cycle pbb remains profitable and well capitalised Pre-provision profit of € ~300 mn provides for solid risk absorption capacity CET 1 ratio is more than 600 bp (€ 1 bn) above the regulatory requirement In light of the challenging market environment, 2023
Slide 4: Agenda
1. Highlights 2023 and P&L 2. Portfolio Quality Focus US AGENDA Focus Development Focus Office 3. Funding 4. Capital 5. Outlook 6. Appendix Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 4
Slide 5: Highlights 2023: Strong KPIs despite challenging markets
HIGHLIGHTS 2023 Strong KPIs despite challenging markets Pre-provision profit of € ~300 mn PBT NII Strong NII despite loss of TLTRO and floor income € 90 mn € 482 mn pbb’s financial strength is built to manage (2022: € 213 mn) (2022: € 489 mn) the cycle Selective REF portfolio growth with imp
Slide 6: Operating & Financial Overview: Growing REF portfolio, rising margins
OPERATING & FINANCIAL OVERVIEW Growing REF portfolio, rising margins REF new business Q4 REF portfolio € bn (commitments, incl. extensions > 1 yr.) 9M € bn (financing volume) +1.8 ~170 bp ~205 bp 31.1 New business volume 29.3 REF portfolio growth 9.0 adjusted to challenging Improved portfolio
Slide 7: Operating & Financial Overview: Strong pre-provision profit cushions risk costs
OPERATING & FINANCIAL OVERVIEW Strong pre-provision profit cushions risk costs Operating income NII/NCI General admin. expenses Personnel € mn (IFRS) Realisation & other income € mn (IFRS) Non-personnel Loss of TLTRO/ interest floors 603 NII/NCI well ahead of initial 249 Investments into IT 531
Slide 8: Operating Income: pbb benefits from its financial strength
OPERATING INCOME pbb benefits from its financial strength Net interest and commission income Q4 Net income from realisations € mn (IFRS) Q3 2023: € mn (IFRS) • REF portfolio growth Q2 • Improved portfolio margin Prepayment fees Q1 Loss of TLTRO/ • Retail deposits at favourable 6 interest floors cost
Slide 9: Operating Expenses: pbb invests into process and cost efficiencies
OPERATING EXPENSES pbb invests into process and cost efficiencies Operating expenses Personnel expenses € mn (IFRS) Investments of € 35 mn in strategic agenda in 2023 Non-personnel expenses Write-downs IT transformation (€ 5 mn) to achieve cost savings Insourcing of IT infrastructure and IT pers
Slide 10: Risk Costs: Risk provisioning mainly driven by US
RISK COSTS Risk provisioning mainly driven by US Net income from risk provisioning Stage 1&21 Balance sheet – loss allowances Stage 1 € mn (IFRS) Stage 3 € mn Stage 2 Other2 Stage 3 189 bp 161 bp REF 135 bp 589 12 coverage 494 41 -16 -5 -9 1 -2 1 400 59 134 -21 -95 -100 50 114 -211 139 -83 -108 414
Slide 11: Agenda
1. Highlights 2023 and P&L 2. Portfolio Quality Focus US AGENDA Focus Development Focus Office 3. Funding 4. Capital 5. Outlook 6. Appendix Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 11
Slide 12: REF Portfolio: Portfolio quality remains solid
REF PORTFOLIO Portfolio quality remains solid REF Portfolio Performing € bn (EaD, Basel III) Non-performing Portfolio quality remains solid – focus on prime properties in core locations 33.0 31.0 1.5 0.8 Collateral values of entire portfolio reviewed in 2023 – low avg. LTV1 of 53% already reflec
Slide 13: NPL Portfolio: Pro-active NPL management
NPL PORTFOLIO Pro-active NPL management NPL Portfolio € mn (EaD, Basel III) -41 1,535 +36 +387 -146 -174 1,335 4 loans +638 4 loans 5 loans 835 14 loans 12/22 Additions FX/EaD Recovered/ 09/23 Additions FX/EaD Recovered/ 12/23 Sale/ Sale/ Repayment Repayment Regions Property Type 31/12/2023 (EaD, Ba
Slide 14: Focus: US – Performing
FOCUS: US – PERFORMING Entire portfolio revalued in 2023 Performing Portfolio € bn (EaD, Basel III) USA largest liquid and transparent CRE market – low market share of pbb allows for selective business. pbb focuses only on 7 4.7 4.5 gateway-cities (CBDs) and predominantly on East Coast office Fu
Slide 15: Focus: US – Non-Performing
FOCUS: US – NON-PERFORMING Pro-active workout and restructuring limited NPL increase to € ~300 mn US NPL Portfolio € mn (EaD, Basel III) Active management of NPL portfolio with 3 US loans (€ 201 mn) successfully restructured/worked out in 2023 2 loans (€ 172 mn) recovered to performing and 1 loa
Slide 16: Focus: Development Portfolio – Strict underwriting standards
FOCUS: DEVELOPMENT PORTFOLIO Strict underwriting standards Portfolio Performing Phase Portfolio significantly reduced since 2019 (12/19: € 4.7 bn, € bn (EaD, Basel III) Non-performing 31/12/2023 (commitments, Basel III) 12/23: € 3.2 bn) – turnover of € 6.3 bn due to repayment (~70%) 3.5 or transfe
Slide 17: Focus: Office Portfolio – Solid portfolio quality
FOCUS: OFFICE PORTFOLIO Solid portfolio quality Office Portfolio Performing European office structure is different from US office. Flight to € bn (EaD, Basel III) Non-performing quality trend remains intact, different home office behavior, 16.3 16.7 different sponsor behavior, lower vacancies and
Slide 18: Focus: Office – Non-Performing
FOCUS: OFFICE – NON-PERFORMING Pro-active NPL management Office NPL Portfolio Active management of NPL portfolio with 3 office loans € mn (EaD, Basel III) (€ 207 mn) successfully restructured/worked out in 2023 2 loans (€ 172 mn) recovered to performing and 1 loan repaid +44 -116 849 +49 -20 787
Slide 19: Agenda
1. Highlights 2023 and P&L 2. Portfolio Quality Focus US AGENDA Focus Development Focus Office 3. Funding 4. Capital 5. Outlook 6. Appendix Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 19
Slide 20: Funding and Liquidity: Strong liquidity position – 2024 largely covered
FUNDING AND LIQUIDITY Strong liquidity position – 2024 largely covered Capital market funding needs for 2024 largely covered LCR NSFR Pre-funding across toolbox and moderate new business result in lower 2024 funding needs No Senior Unsecured benchmark in 2024 to be issued, substituted by retail
Slide 21: Funding and Liquidity: Diversified funding base
FUNDING AND LIQUIDITY Diversified funding base Diversified Funding Base Unsecured Funding 31/12/2023: € bn, nominal values 4.1 18% 26% 40% 1.4 2.3 16.3 82% 74% 60% 7.0 € 49.2 bn 12/19 12/22 12/23 Retail Deposits Wholesale Unsecured 6.6 7.4 3.2 0.9 Over 55% resilient secured funding3 Mortgage Pfand
Slide 22: Funding and Liquidity: Capital market funding focused on Pfandbrief
FUNDING AND LIQUIDITY Capital Market funding focused on Pfandbrief New long-term funding1 Unsecured wholesale largely replaced by stable and competitive € bn retail deposits 2022: € 6 bn 2023: € 3.3 bn 02/2024: € 0.8 bn One Senior Unsecured benchmark in early 2023 Spread 12 138 39 205 65 - No
Slide 23: Retail Deposits: Retail deposits continue to grow
RETAIL DEPOSITS Retail deposit continue to grow Retail Deposits – development & maturity profile1 Granular, long-term and deposit insured € bn Granular: € 63,000 average deposit (pbb direkt) WAL WAL Long-term: 88% with 3.8 yrs WAL 3.1 yrs 3.8 yrs Deposit insured2: nearly 100% Call money on
Slide 24: Agenda
1. Highlights 2023 and P&L 2. Portfolio Quality Focus US AGENDA Focus Development Focus Office 3. Funding 4. Capital 5. Outlook 6. Appendix Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 24
Slide 25: Capital: pbb well capitalised
CAPITAL pbb well capitalised Basel III: Capital and leverage ratios 15.7% CET 1 capital ratio remains well above management (IFRS) ambition level 21.8% 19.2% 19.5% REF portfolio growth and internal rating developments resulted in higher RWA 16.7% 15.2% 15.7% Quarter-over-quarter increase drive
Slide 26: Capital: Road to new model landscape – Different ratio, same capital
CAPITAL Road to new model landscape – Different ratio, same capital CET1-ratio Transitional period (IFRS) Basel IV target landscape 2025 BASEL IV Foundation Internal Ratings-based Approach (F-IRBA) will 16.7% be applied for the majority of pbb’s portfolio following Basel IV 15.2% 15.7% ≥14% >15% i
Slide 27: Agenda
1. Highlights 2023 and P&L 2. Portfolio Quality Focus US AGENDA Focus Development Focus Office 3. Funding 4. Capital 5. Outlook 6. Appendix Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 27
Slide 28: Economic Outlook: Base case: modest economic growth outlook
ECONOMIC OUTLOOK Base case: modest economic growth outlook GDP growth picks up moderately in Europe In 2024 and 2025, pbb expects GDP growth in Continental % Europe, while the UK is expected to grow again by ~0.5% this 3 2.5 1.8 year, and ~1.3% in 2025. US GDP is expected to expand 2 1.4 1.2 1.5 1
Slide 29: Guidance 2024
GUIDANCE 2024 Solid operating income strength; PBT expected significantly above 2023 level New business (incl. extensions > 1 year) € 6-7 bn REF Portfolio Financing volume € 30-31 bn Operating Income € 525-550 mn thereof: NII + NCI € 475-500 mn P&L LLPs << 2023 CIR ~50% Pre-tax profit >> 2023 Profit
Slide 30: Agenda
1. Highlights 2023 and P&L 2. Portfolio Quality Focus US AGENDA Focus Development Focus Office 3. Funding 4. Capital 5. Outlook 6. Appendix Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 30
Slide 31: pbb's Leadership Team
PBB‘s LEADERSHIP TEAM Extensive experience Kay Wolf Marcus Schulte Thomas Köntgen Andreas Schenk Dr. Pamela Hoerr Chief Executive Officer Chief Financial Officer Deputy-CEO & Chief Risk Officer pbb invest, & Treasurer Real Estate Finance HR & ESG Member of the Management CFO since December 2023,
Slide 32: Appendix
1. Financials 2. REF New Business APPENDIX 3. Portfolio profile 4. Funding & Ratings 5. ESG Contact Details Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 32
Slide 33: Key Figures pbb Group
KEY FIGURES pbb Group Income statement (€ mn) 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Q1/23 Q2/23 Q3/23 Q4/23 2023 Net interest income 494 122 120 116 131 489 106 110 132 134 482 Net fee and commission income 8 2 1 1 4 8 1 1 1 0 3 Net income from fair value measurement 10 9 5 7 -1 20 1 -1 2 -2 0 Net incom
Slide 34: Key Figures Real Estate Finance (REF)
KEY FIGURES Real Estate Finance (REF) Income statement (€ mn) 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Q1/23 Q2/23 Q3/23 Q4/23 2023 Net interest income 417 104 103 101 112 420 96 101 117 120 434 Net fee and commission income 8 2 1 2 3 8 1 1 2 0 4 Net income from fair value measurement 6 6 4 4 0 14 0 -1 2 -
Slide 35: Key Figures Non-Core (PIF & VP)
KEY FIGURES Non-Core (PIF & VP) Income statement (€ mn) 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Q1/23 Q2/23 Q3/23 Q4/23 2023 Net interest income 75 17 17 15 18 67 9 9 14 14 46 Net fee and commission income 0 0 0 -1 1 0 0 0 -1 0 -1 Net income from fair value measurement 4 3 1 3 -1 6 1 0 0 -1 0 Net income f
Slide 36: Balance Sheet
BALANCE SHEET pbb is a leading European specialist lender Balance sheet IFRS, € bn Assets 31/12/23 31/12/22 Liabilities & equity 31/12/23 31/12/22 Financial assets at fair value through P&L 0.9 1.1 Financial liabilities at fair value through P&L 0.7 0.7 thereof thereof Positive fair values of stand-
Slide 37: Appendix
1. Financials 2. REF New Business APPENDIX 3. Portfolio profile 4. Funding & Ratings 5. ESG Contact Details Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 37
Slide 38: REF New Business: REF portfolio growth with improving margin
REF NEW BUSINESS REF portfolio growth with improving margin Volume of strategic REF portfolio in € bn Growth in strategic REF portfolio benefitting from drawdowns of (financing volume) new business and low level of prepayments and repayments +€ 1.8 bn Avg. portfolio margin further up New busin
Slide 39: REF New Business: Diversification supports management of the cycle
REF NEW BUSINESS Diversification supports management of the cycle As of 31/12/23 Regions Property types Mixed use/ Other Hotel other Nordics 7% 4% 9% 2% € 7.2 bn Logistics/ Germany storage 25% CEE 12% 39% 45% Office New business (commitments, incl. 9% extensions > 1 year) USA 8% 11% Retail 14% 16% U
Slide 40: Appendix
1. Financials 2. REF New Business APPENDIX 3. Portfolio profile 4. Funding & Ratings 5. ESG Contact Details Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 40
Slide 41: Portfolio: Total portfolio
PORTFOLIO Total portfolio Regions (EaD, Basel III ) 31/12/2022 / Total: € 50.0 bn 31/12/2023 / Total: € 51.3 bn Hungary < 1% Hungary < 1% Other Europe 5% Other Europe 5% Finland 1% Finland 1% Other Rest of World 2% Other Rest of World 1% Czech Republic 1% Czech Republic 1% Sweden 2% 5% Sweden 2% 5%
Slide 42: Portfolio: Real Estate Finance (REF)
PORTFOLIO Real Estate Finance (REF) Regions Property types 31/12/2022: € 31.0 bn 31/12/2023: € 33.0 bn 31/12/2022: € 31.0 bn 31/12/2023: € 33.0 bn Austria 1% Mixed use 1% Mixed use 1% Austria 1% Other Europe Other Europe Other 1% Hotel 3% Other 1% Czech Republic 1% Czech Republic 2% Hotel 4% Retail
Slide 43: REF Portfolio: LTV development reflects market environment
REF PORTFOLIO LTV development reflects market environment REF Portfolio: LTV cluster1 € bn Avg. LTV1 12/22: 51% 12/23: 53% 62% 56% 54% 55% 60% 54% 54% 52% 51% 52% 57% 51% 51% 51% 56% 55% 50% 50% 55% 49% 54% 47% 48% 53% 53% 47% 47% 52% 52% 52% 51% 51% 50% 45% 49% 48% 43% 43% 47% 47% 45% 43% Germany U
Slide 44: REF Portfolio: Sub-segments
REF PORTFOLIO Sub-segments Property Regions Evaluation of current situation Challenges Risk positioning 2023 was still challenging. Due to the overall economic Cooling of tenant market due to overall economic Focus on good locations in main European situation occupiers were still reluctant. Al
Slide 45: REF Portfolio: Sub-segments
REF PORTFOLIO Sub-segments Property Regions Evaluation of current situation Challenges Risk positioning Inflation and high interest rates weakened retail Short Term: threats to income stability as well as Selective approach with planned sales in 2023. In 2024 consumer confidence decreasing con
Slide 46: REF NPL Portfolio: US NPLs down in Q4/23
REF NPL PORTFOLIO US NPLs down in Q4/23 Geographical breakdown Breakdown by property type € bn (EaD, Basel III) € bn (EaD, Basel III) 1,535 1,535 1,335 1,335 164 4 187 339 415 Other & Guaranteed 364 835 361 835 Others Hotel 404 France 65 Logistics CEE 331 Residential 360 UK Retail 849 787 114 691 60
Slide 47: Portfolio: Non-Core Unit (PIF & VP)
PORTFOLIO Non-Core Unit (PIF & VP) Regions Borrower classification1 31/12/2022: € 15.2 bn 31/12/2023: € 13.2 bn 31/12/2022: € 15.2 bn 31/12/2023: € 13.2 bn Financial Institution 2% Other Europe 3% Financial Institution 2% Corporation 1% Corporation 1% Supranational 1% Other Europe 3% Other Rest of W
Slide 48: Portfolio: Consolidation and Adjustments (C&A)
PORTFOLIO Consolidation and Adjustments (C&A) Regions Borrower classification2 Internal ratings (EL classes) 31/12/2022: € 3.7 bn 31/12/2022: € 3.7 bn 31/12/2022: € 3.7 bn Other Europe Other Rest of World Corporation 9–11 Sweden < 1% Supra UK 1% 8% 6% 1% USA 1% 9% 10% Poland 2% 99% Italy 4% Investme
Slide 49: Appendix
1. Financials 2. REF New Business APPENDIX 3. Portfolio profile 4. Funding & Ratings 5. ESG Contact Details Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 49
Slide 50: Mortgage Cover Pool
MORTGAGE COVER POOL Diversification by countries and property types Mortgage Cover Pool Regions Property types Key metrics Spain 1.1% Switzerland 0.3% Austria 1% Italy 0.3% Benelux Nordic countries 4% Other Mortgage cover pool (nominal) 31/12/2023 6% 24% Pfandbriefe outstanding € 17.0 bn CEE 10% Cov
Slide 51: Funding: Own Funds and Eligible Liabilities exceed 8% TLOF
FUNDING Own Funds and Eligible Liabilities exceed 8% TLOF € bn Buffer for Senior Preferred (SP) MREL2 Composition of Rundown investors due to high volume of (31/12/2023) Liabilities capital instruments and Senior (31/12/2023) Non-Preferred (SNP) liabilities Existing Senior Non-Preferred liabilit
Slide 52: Funding: Public benchmark issuances since 2020
FUNDING Public benchmark issuances since 2020 Types WKN Launch Date Maturity Date Size Spread1 Coupon Issue/Reoffer Price Mortgage Pfandbrief A2YNVY 14.01.2020 21.01.2028 € 750 mn +5 bp 0.10% 99.992% Mortgage Pfandbrief (2nd Tap) A1X3LT 15.01.2020 21.01.2022 € 150 mn 0 bp 1.875% 104.36% Mortgage Pfa
Slide 53: Mandated Ratings
MANDATED RATINGS Bank ratings S&P Long-term BBB- Outlook/Trend Negative Short-term A-3 1 Stand-alone rating bb+ Long Term Debt Ratings “Preferred” senior unsecured Debt2 BBB- “Non-preferred” senior unsecured Debt3 BB- Subordinated Debt B+ Pfandbrief ratings Moody’s Mortgage Pfandbrief Aa1 Public Sec
Slide 54: Appendix
1. Financials 2. REF New Business APPENDIX 3. Portfolio profile 4. Funding & Ratings 5. ESG Contact Details Annual Results 2023 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 7 March 2024 / © Deutsche Pfandbriefbank AG 54
Slide 55: ESG Program provides for holistic approach
ESG ESG Program provides for holistic approach ESG Program ESG at core of pbb’s strategy: pbb can help to reduce the real estate sector`s significant CO2 impact Green finance bank and transformation partner Current KPIs set initial roadmap for establishing green products, science-based decar
Slide 56: ESG: pbb continues to execute on its strategy
ESG pbb continues to execute on its strategy P P 2021: 2017: 2020: P Holistic organisational set-up of 1st Non-financial Report Introduction of Green ESG Programm (NFRD) Bond Framework Introduction of green building Focus on scoring model & pbb Green Loan Transparency of Framework pbb‘s portfolio an
Slide 57: Green Loan: pbb Green Loan Framework criteria
GREEN LOAN pbb Green Loan Framework aligned with current regulatory and market developments – specific metrics defined for each criterion pbb Scoring Model EU Taxonomy MAX SCORE: 100 Points III. Additional Sustainability I. Energy Efficiency II. Building Certification Factors Energy demand/-consum
Slide 58: ESG: Continued progress in sustainable finance activities
ESG Continued progress in sustainable finance activities Green share of REF portfolio1 (commitments, green loan eligible assets, %) 74% of REF portfolio scored – scoring of remaining > 30% portfolio ongoing Green share of total REF portfolio currently at 22% resp. 22% 30% on € 7.4 bn (30% based
Slide 59: Definition of Borrower Classifications
DEFINITION OF BORROWER CLASSIFICATIONS Borrower classification Definition Sovereign Direct and indirect obligations of Central Governments, Central Banks and National Debt Agencies Sovereign (related) Indirect obligations of Non Sovereigns with an explicit first call guarantee by a Sovereign Regiona
Slide 60: Contact Details
CONTACT DETAILS Grit Beecken Axel Leupold Head of Communications, Marketing and Investor Relations Investor Relations/Rating Agency Relations +49 (0)89 2880 28787 +49 (0)89 2880 23648 grit.beecken@pfandbriefbank.com axel.leupold@pfandbriefbank.com Michael Heuber Head of Investor Relations/Rating Age
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